Deutsche Bank: "We Fully Understand Why The Authorities Wouldn't Want Free Markets To Operate Today"Submitted by Tyler Durden on 05/09/2013 09:06 -0400
"Is it healthy that the default/insolvency cycle is being sedated in so many large economies? Surely the financial system and life in general has prospered through history on the basis of creative destruction. Indeed all the good looking and intelligent readers of this note are products of survival of the fittest. Economic growth over time is helped by a regular cleansing. So are low defaults helping to lock in low growth for years to come across many large economies? Clearly there are other factors at work here but we think that what's great for credit investors isn't necessarily good for the global economy. A bit of a paradox. We would stress that we fully understand why the authorities wouldn't want free markets to operate today as the risk of a huge global default and unemployment cycle would still be very high. However their intervention has a cost in our opinion."
The market is beyond overstretched at this point on a short-term, intermediate term, and long-term basis. The sheer number of warning signals is staggering.
The world's central banks have printed unimaginable amounts of money in recent years - "these guys are really more powerful than the government." Neil Macdonald explores what this means for the global economy and for your financial well-being - "can you imagine if the American public knew there was this 'club' that met secretly in Switzerland and made decisions that dramatically affected their lives, but we're not going to tell you about it because it's too complicated." This brief documentary should open a few eyes to the reality behind the world's most powerful (and real) cabal.
Elliott's Singer On Bernanke Destroying "The Value Of Money" And "Uprooting The Basic Stability Of Society"Submitted by Tyler Durden on 05/03/2013 19:26 -0400
"We believe that the global central bankers, led by the Fed as “thought leader,” have no idea how much pain the world’s economy may endure when they begin the still-undetermined and never-before attempted process of ending this gigantic experimental policy. If they follow the paths of the worst central banks in history, they will adopt the “tiger by the tail” approach (keep printing even as inflation accelerates) and ultimately destroy the value of money and savings while uprooting the basic stability of their societies.... At some stage, central banks inevitably realize, regardless of whether they admit the catastrophic nature of their own failings, that the cessation of money-printing will cause an instant depression. Even though at that point the cessation of money-printing may be the only action capable of saving society, that becomes a secondary consideration compared to the desire to avoid immediate pain and blame."
We discussed previously the slowing of the global economy and the drag on global trade and it appears that despite some hope-ridden headline data from China, things are definitely troubling under the surface. As Bloomberg Brief's Michael McDonough notes, while superficially, export growth was a rare bright spot in the first quarter, it may have been exaggerated by exporters inflating invoices. Excluding exports to Hong Kong, March’s export growth would have fallen 4.8 percent year-on-year compared with the reported 10 percent. China’s exports to 14 of its top 20 trading partners declined in March year-on-year. Tepid global demand may continue to weigh on China’s exports and domestic economy - and in its vicious cycle manner, feed back into global growth (and stain the US 'clean' shirt).
- Gold Bears Defy Rally as Goldman Closes Short Wager (BBG)
- Still stuck on central-bank life support (Reuters)
- Ebbing Inflation Means More Easy Money (BBG)
- So much for socialist wealth redistribution then? François Hollande to woo French business with tax cut (FT)
- Billionaires Flee Havens as Trillions Pursued Offshore (BBG)
- Companies Feel Pinch on Sales in Europe (WSJ)
- Brussels plan will ‘kill off’ money funds (FT)
- Danes as Most-Indebted in World Resist Credit (BBG)
- Syria says prime minister survives Damascus bomb attack (Reuters)
- Syria: Al-Qaeda's battle for control of Assad's chemical weapons plant (Telegraph)
- Nokia Betting on $20 Handset as It Loses Ground on IPhone (BBG)
- Rapid rise of chat apps slims texting cash cow for mobile groups (FT)
- Calgary bitcoin exchange fighting bank backlash in Canada (Calgary Herald)
While suicides out of desperation had long been a tragic, if recurring, staple in depressionary Europe, so far popular anger had been directed at within, with few if any murderous outbursts targeted at other people, and certainly not at politicians (or financiers). This obviously has been a critical aspect of the current economic collapse in Europe - one needs but recall that it was a political assassination that sparked World War I in Sarajevo, and indirectly, via the Weimar collapse of Germany, set the stage for World War II, leading to the death of tens of millions around the globe. Today we came close. As the AP reports, during today's swearing in ceremony of Italy's new pseudo-technocrat yet anti-austerity government which has the blessings of Berlusconi, an "unemployed Italian gunman shot and seriously wounded two policemen Sunday in a square outside the premier's office in Rome, but he "wanted to shoot politicians," Rome prosecutor Pierfilippo Laviani said.
In a slight digression from the usual pure market-based discussions of Jeremy Grantham's perspectives, the fund manager addresses what is potentially and even more critical factor for the markets. As he writes, we are in a race for our lives, as our global economy, reckless in its use of all resources and natural systems, shows many of the indicators of potential failure that brought down so many civilizations before ours. By sheer luck, though, ours has two features that might just save our bacon: declining fertility rates and progress in alternative energy. Our survival might well depend on doing everything we can to encourage their progress. Vested interests, though, defend the status quo effectively and the majority much prefers optimistic propaganda to uncomfortable truth and wishful thinking rather than tough action. It is likely to be a close race.
The crypto-currency Bitcoin is still merely a speck on the global monetary landscape. It is young, experimental, and for all we know, it may ultimately fail to break into the monetary mainstream. However, on a conceptual level some are willing to call it a work of genius and arguably the most exciting development in the field of money for more than 130 years. The outcome is probably binary: Either Bitcoin ultimately fails and the individual Bitcoins end up worthless. Or Bitcoin takes off and Bitcoins are worth hundreds of thousands of paper dollars, paper yen, paper euros, or paper pounds. Maybe more. Those who buy Bitcoin as a speculative investment should consider it an option on the future success of the crypto-currency. We still consider gold to be the essential self-defense asset in the ongoing paper money crisis. The brand-new crypto-currency Bitcoin has to first earn its stripes as a monetary asset by proving itself as a ‘common’ medium of exchange. That is why we view Bitcoin very differently from gold, although the attraction of both has its origin in the demise of entirely elastic, politicized state fiat money. In the meantime, the debasement of paper money continues.
Investors take note, a false breakout is an extremely dangerous thing. If the stock market is in fact failing to maintain its upward breakout, we could see a sharp reversal similar to that of Gold (Gold has lead stocks for much of the post-2008 period).
It is one thing for the market to no longer pay attention to economic fundamentals or newsflow (with the exception of newsflow generated by fake tweets of course), but when the mainstream media turns full retard and comes up with headlines such as this: "German Ifo Confidence Declines After Winter Chilled Recovery" to spin the key overnight event, the German IFO Business climate (which dropped from 106.2 to 104.4, missing expectations of 106.2 of course) one just has to laugh. In the artcile we read that "German business confidence fell for a second month in April after winter weather hindered the recovery in Europe’s largest economy... “We still expect there to have been a good rebound in the first quarter, although there is a big question mark about the weather,” said Anatoli Annenkov, senior economist at Societe Generale SA in London." We wonder how long Bloomberg looked for some junior idiot who agreed to be memorialized for posterity with the preceding moronic soundbite because this really is beyond ridiculous (and no, it's not snow in the winter that is causing yet another "swoon" in indicators like the IFO, the ZEW and all other metrics as we patiently explained yesterday so even a 5 year old caveman financial reported would get it).
When sales reps, Easter, and the sequester get blamed for worldwide sales declines
All in all, the markets are falling for the same ploy they’ve fallen for dozens of times in the last few months: more political promises from those who cannot and will not do what is needed to solve the region’s problems.
"While I think this policy is fundamentally right, I think [austerity] has reached its limits," was EU President Barroso's firestarter comment yesterday. As the WSJ reports, the IMF also said last week that the bloc should ease back on austerity, while a number of governments outside the EU have made the same call, arguing that its belt-tightening is holding back the global economic recovery and could end up being self-defeating. Of course, the beggars are once again trying to be choosers as Spain's de Guindos pushes his agenda along this 'growth vs austerity' path, "What we are going to do now is strike a better balance between deficit reduction and economic growth," but it is the bagholders (or money-men) of Europe that has the last word. As we noted yesterday, Merkel's expectations are no more money without ceding sovereignty, this morning it is German MPs who are up in arms as Nobert Barthle condemns Barroso's statements on austerity and Hans Michelbach flatly rejects this path of no resistance as it "undermines fiscal consolidation efforts." Perhaps the most clear message was from Volker Wissing who added, "demanding more money or time would send a 'fatal' signal to financial markets on reforms." With German PMIs so bad this morning, we are reminded of Bill Blain's comment, that ultimately growth is about confidence - and right now, Europe is a very unhappy place.
The commodity market is saying global growth is slowing. But, there is hope, as BofAML's David Woo notes, the US equity market is saying US consumers are still going strong; and the FX and European sovereign markets seem to believe Mrs. Watanabe is about to embark on a global shopping spree. However, like us, Woo thinks it is unlikely that these markets will all turn out to be right. At the same time, we agree completely with Woo's assessment that markets may be under pricing three macro risks: the ability of Beijing to ease policy aggressively in the face of strong home price appreciation may be limited; the positive wealth effect of US housing recovery may not be enough to offset the contractionary impact of fiscal tightening; Japanese money may stay at home longer than expected. As he concludes, "something will have to give and a major re-alignment of the markets, the odds of which are rising, will probably not be either smooth or benign."